The equity holding of Bajaj Auto in Austria's power bike company KTM Power Sport AG will be scaled up in the coming years to leverage on the foreign company's superior expertise in technology and brand name.
Bajaj Auto, through its 100 per cent Dutch subsidiary, Bajaj Auto International Holding BV, will buy the additional stakes in the Vienna Stock Exchange-listed KTM on-behalf of the company.
The Pune-based company has so far spent Rs 700-800 crore (119.62 million pounds) in buying 31.72 per cent stake in KTM. Rajiv Bajaj, managing director, Bajaj Auto has already secured a seat on the KTM Board.
KTM will form a crucial part of Bajaj Auto's overseas strategy, including merger and acquisition, as the European company brings with it intricate knowledge of key overseas markets like Europe and North America.
Bajaj will have the upper hand, as it stands to gain from KTM's extensive research and development support, as well as its dealership size globally. KTM will look to tap into Bajaj's low-cost supplier base to gain economies of scale.
Speaking to Business Standard, Rajiv Bajaj stated, "We looked at a number of companies (prior to KTM). We were primarily looking for a powerful brand, with premium priced products. We chose to go in for a qualified and best managed company than a limping organisation which hoped for a revival (by selling to us); thus, KTM fits the bil."
KTM, which is Europe's second largest bike producer, will start production of its high-end bikes at Bajaj's Chakan facility (near Pune) in the next few months, which will be subsequently launched in the Indian market.
"We have a clear understanding between us. Looking at a time frame of five years, we would have scaled up our holding in KTM. To what level is something we haven't thought about, but something like 50 per cent is a possibility in the future. This a slow process of integration between the two companies," added Bajaj.
Before settling on KTM, Bajaj Auto was in talks with UK's Triumph, a super-bike making company specialising in cruisers and also with Italy's famed motorcycle company, Ducati, as both firms were in need of funds, with an eye on making a foray into the Indian two-wheeler market.
Meanwhile, Ducati has forayed into India on its own with the help of an official importer, while Triumph is yet to finalise its import plans.
The first of the Bajaj-KTM alliance's products to be sold here will perhaps be a four-stroke 125cc-250cc sports bike, to be launched within a year. Work on these joint products started in 2007.
KTM will also launch locally assembled as well as fully imported bikes in the domestic market. It will also seek to take advantage of Bajaj's growing presence in the Chinese market.